Canada's Consumer-Driven Banking Framework (Framework) was released alongside the 2024 federal budget, and serves as an update to the previously released 2023 Fall Economic Statement: Policy Statement on Consumer-Driven Banking. Here is what you need to know:
Wait, what is "consumer-driven banking"?
More commonly known as "open banking" or sometimes referred to as "consumer-directed finance," consumer-driven banking refers to a framework that allows consumers and small businesses to securely transfer their financial data through an application programming interface (API) to approved service providers of their choice.
Who benefits?
Building on the earlier Policy Statement, the Framework continues to emphasize benefits to consumers, small businesses and the Canadian economy at large. Among other things, it touts increased control over financial data and security protections for consumers; reduced administrative burdens, efficiency, and improved product access for small businesses; and global competitiveness and innovation in the financial sector.
So, what do we know about the Framework?
The development of the Framework is guided by three public policy objectives:
- Safety and Soundness
- Protecting Canadians' Financial Well-Being
- Economic Growth and International Competitiveness
These policy objectives have guided the development of the government's six (previously five, now including "National Security") core Framework elements, as follows:
1 |
Governance |
The Framework expands on the oversight and management elements, notably:
|
2 |
Scope |
The Framework provides additional information on the entities that will be able to participate, the scope of data that participants will be required to share, certain functional requirements for participation and details on the future expansion of "scope." The initial phase of implementation will include:
The scope may be expanded at a later date to include additional data, entities, entry processes (e.g., tiered accreditation), and functionalities (such as the ability to initiate payments). |
3 |
Accreditation |
Tiered accreditation (i.e., different accreditation requirements for entities) will not be included at this initial phase. |
4 |
Common rules |
The implemented Framework will include common rules (as a condition to access of consumer data). The common rules:
Note further that in respect of privacy, participants will be required to:
The implemented Framework will clearly set out a liability structure that establishes a statutory relationship between participants of the open banking system. This liability structure:
Clear security requirements for how voluntary and mandated participants protect consumers' data will also be established by the implemented Framework. Legislation is expected to:
The Department of Finance will engage with stakeholders to finalize a recommendation in respect of the selection of this certification as well as the extent of the reporting obligations. |
5 |
National Security |
The implemented Framework will include safeguards and provide authorities to the Minister of Finance that align with existing financial sector statutes. The Minister will be able to:
|
6 |
Technical Standard |
The implemented Framework will include a government-mandated single technical standard that:
Legislation will provide authority to the Minister of Finance to identify and revoke a technical standard, and authority to the FCAC to supervise the technical standard body to ensure compliance with open banking regulations. |
What's next?
- Spring 2024: Framework legislation was expected to be introduced in Budget 2024. Instead, the government intends to introduce the first of two pieces of legislation to implement the Framework this Spring. This legislation will address key elements such as governance, scope, and criteria and process for the technical standard.
- Fall 2024: Remaining elements of the Framework would be legislated in the Fall of 2024, which is expected to be introduced in connection with a second budget implementation act. The government has not indicated if FCAC's expanded mandate will be introduced as part of the first or second piece of legislation.
- Beyond: While the government previously set a goal of fully implementing the necessary Framework for the operationalization of open banking in Canada by 2025, Budget 2024 did not specify such a date. However, it noted that the implemented Framework is expected to be reviewed after three years to ensure it continues to meet core objectives and reflect the needs of Canadians.
In the meantime, the Department of Finance will continue to engage with all stakeholders, including federal, provincial and territorial governments, as open banking legislation is developed.
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